In a fresh move that has intensified Nigeria’s petrol price war, the Nigerian National Petroleum Company Limited (NNPC) has reduced the pump price of Premium Motor Spirit (PMS) to N860 per liter.
The new price, effective Monday, marks a significant drop from the previous average of N920 per liter, bringing some relief to millions of Nigerians grappling with the high cost of living.
The price cut by NNPC, the nation’s largest fuel supplier, follows a similar move by Dangote Petroleum Refinery and Petrochemicals Limited, which slashed its ex-depot price of petrol from N890 per liter to N825 last week. This marked Dangote’s second price reduction in February, sparking a wave of competitive pricing among private marketers.
Dangote, in a public notice, listed its partner off-takers prices at select filling stations in Lagos, with MRS selling petrol at N860 per liter, and AP and Heyden at N865 per liter. These moves have not only intensified competition but also pressured the NNPC to adjust its pricing strategy to maintain its market share.
However, as Nigerians express excitement over the lower prices, analysts are raising concerns over potential repercussions, particularly concerning the NNPC’s financial obligations to the Federation Account Allocation Committee (FAAC).
“The issue with this format is that NNPC will withhold some money that they are supposed to pay into the federation account. They cannot justify this reduction since most of their products are being imported and landing cost remain N927,” Johnson Kio said.
Before now, economists have expressed concerns that the NNPC’s price reduction could negatively impact its remittance to FAAC, where the company has reportedly struggled with consistency. This apprehension stems from the fact that the rehabilitated Port Harcourt Refinery has not yet fully started operations, meaning the NNPC still depends heavily on fuel importation to meet domestic demand.
Data from the January 2025 motor tanker vessel report highlights this reliance, showing that the NNPC imported 212,870,340 liters of petrol to Calabar and Lagos ports. With the landing cost of petrol products peaking at N927 per liter just weeks ago, analysts are questioning the economic viability of the NNPC’s latest price cut.
The NNPC’s FAAC remittance is critical to Nigeria’s fiscal stability, as federal, state, and local governments rely on these funds for budgetary allocations. Any shortfall could lead to disruptions in public sector funding, including salaries and infrastructure projects.
Is the Price Cut Sustainable?
While the price reduction has been welcomed by many, skepticism remains high. Many Nigerians recall past experiences where temporary price cuts were quickly followed by sharp hikes, often with minimal explanation.
The NNPC’s aggressive price cut appears to be a strategic response to maintain its dominance in the downstream market. However, given its reliance on imports and the high landing costs, the move may have financial implications for the state-owned company.
Energy experts have argued that the current price reduction might deepen this inconsistency, especially if the company continues to sell petrol at a loss.
Many believe that the sustainability of this price cut will depend on how quickly the Port Harcourt Refinery can come online and reduce import dependence. Without local refining capacity, the NNPC might find itself in a precarious financial situation.
For Nigerians, any reduction in petrol prices has a direct impact on the cost of transportation and goods. However, if the NNPC’s price cut is not economically sustainable, it could lead to a fresh cycle of market instability.
Market observers also warn that the price cut could lead to fuel shortages if the NNPC is unable to maintain import volumes at the current pricing level.
“”Under recovery”, “foregone margin”, “energy security cost”, and other grammars will soon start,” Dr. F. O. Ehiagwina noted.
